For decades, through career and family ups and downs, you
have relentlessly saved and invested for retirement. Yet, you dread the thought
of running out of money. Many people do.
A recent study by Zety of more than 800 individuals showed
that 47 percent feared retirement more than illness and poor health, and 40
percent more than death. Some concern is warranted. A study by the Boston
College Center for Retirement Research’s National Retirement Risk Index (NRRI),
conducted before the COVID-19 pandemic, indicated that 50 percent of households
may lack the funds to continue their standard of living once work stops. That
number is now 55 percent.
But let's say the numbers in your portfolio show that things
are good. Now that you are retired, or are nearing that point, it’s time to
start spending a little to enjoy life more. It’s time to create a list of
things you have dreamed of doing.
Not convinced? Mark Wilson, a certified financial planner
(CFP) at MILE Wealth Management in Irvine, California, is not surprised.
Regardless of their ample savings, some of his clients picture the worst
possible scenario down the road — they are poor, homeless and living under a
bridge. "There is no reason to be stressed, and we help them understand
that," he says. “Numbers and logic help some to see their situation more
clearly; others feel better knowing that we will protect them from that
bridge.”
Now or maybe never
Realistically, the time for fun may be short. Many folks in
their mid-60s have an ailment that limits their mobility, says James Shagawat,
a CFP at AdvicePeriod in Paramus, New Jersey. "By the time some people let
themselves spend on dining out, vacations, charitable giving, or their children
and grandchildren, they are no longer in the physical condition to enjoy it.”
Patti Black, a CFP at Bridgeworth Wealth Management, LLC, in
Birmingham, Alabama, has two clients in their 90s with $2.7 million in
investments. Still, they worry about a shortfall and becoming dependent on
their kids. “The wife wishes they could travel with the family, but now, their
physical health and the pandemic are making this difficult. It is sad to hear
her express that longing.”
If you or your partner are having trouble letting go, a
financial planning professional can help. You can find a qualified financial
planner with the Financial Planning Association’s PlannerSearch tool. In the
meantime, consider these tips from experts around the country. They emphasize
that the transition from saver to spender may require time and different
approaches.
1. Review your family history
Understanding your relationship with money is a first step
toward learning to spend appropriately, says Byrke Sestok, a CFP at
Rightirement Wealth Partners in Harrison, New York. “Many baby boomers' parents
grew up through the Great Depression, so they were raised to believe that
everything could be gone tomorrow. Having plenty in reserve is a handed-down
script.” Sestok suggests finding a planner who can help you see the roots of
your emotions about money, so you can work through issues that challenge the
pursuit of your goals.
2. Work with your partner
Spouses or partners will have their own feelings about
retirement, as well spending versus saving. The transition into retirement can
put a major strain on a relationship, says Danielle Harrison, who is a CFP, and
a certified financial therapist (FT) at Harrison Financial Planning in
Columbia, Missouri. “I like to see couples work with a holistic CFP, who can
look at all aspects of their situation, and create projections that can help
put their minds at ease.” For more help, she suggests working with an FT who
can help them talk about their fears. Otherwise, it may not be possible to move
forward. “It can be helpful for partners to hear the other person’s stories.”
3. Create a safe and practical plan
Kristin Sullivan, a CFP at Sullivan Financial Planning in
Denver, says a planner can determine how much you can safely withdraw from
investments in the next year. You divide that figure by 12 and have that amount
automatically transferred to your checking account each month. “If you
designate that these withdrawals be made two weeks after your Social Security
check comes, it will be like getting paid from a job again.”
To help her clients adopt more of a spending mindset, Linda
Farinola, a CFP at Princeton Financial Group in Princeton, New Jersey, also
suggests creating a budget for regular living expenses, starting small when it
comes to spending, and making a list of what you would like to do. “Revisit
this plan each year to make sure that things are still on track for the long
term,” she says.
4. Ask yourself the right questions
What would happen if you spent more and saved less? What if
you spend more on travel or increase your donations to charities? Shagawat also
asks about pressing concerns. Do you have a child who is struggling
financially, or do you have Alzheimer’s or other ailments in the family
history? “Finally, we ask ‘What would give you the greatest satisfaction each
year?' The planning process is designed to grant 'permission' to do these
things,” Shagawat says.
5. Create that bucket list, with bank accounts to match
Larry Ginsburg, a CFP at Ginsburg Financial Advisors in
Oakland, California, encourages his clients to create a bucket list, ‘nudging’
them to enjoy themselves before it is too late to avoid regret. Matthew Aaron
Benson, a CFP at Sonmore Financial in Chandler, Arizona, suggests setting up
separate bank accounts for those items to give yourself permission to spend.
“Many banks allow you to give savings accounts a nickname. For example, one
could be the ‘travel to Ireland’ account. This will help, because in your
brain, these funds have already been spent.”
6. Practice splurging, make letting go a game
Small splurges can also help you to experience your life
differently, says Andrew Marshall, CFP at Andrew Marshall Financial LLC, in
Carlsbad, California. “On your next trip, stay in a Ritz-Carlton or other hotel
above your usual level. Buy a business-class ticket for the first time.” Then,
gradually, upgrade your lifestyle in other areas, as you get used to allowing
yourself to use some of your hard-earned dollars.
Patrick Lach, a CFP in Louisville, Kentucky, and an
assistant professor of finance at Indiana University Southeast, “gamifies” the
process, encouraging his clients to draw a fixed percentage of their portfolio
around the same time each year that exceeds their day-to-day spending needs. “I
challenge them to spend this over the next 12 months on a vacation or other
nondiscretionary expense or earmark it for a future splurge.” For this to work,
he says, the amount for living expenses, and for fun, must be sustainable.
“This approach works for clients whose pension and/or Social Security checks
cover most or all of their day-to-day needs,” he says.
7. Create memories you will treasure
In the end, spending on others may be easier, says David
Bize, a CFP at First Allied in Oklahoma City, Oklahoma. He encourages
grandparents to spend on shared experiences with their grandchildren, including
vacations, performances or famous museums, or on their education. “It could be
Montessori preschool, as early childhood education is crucial, or private K-12
school and college.” Black and her sisters took three father-daughter trips
with her dad after their mother died in 2018. “He had never been west, so we
went to Washington, Oregon and Montana. He died in February of this year. The
memories from these trips are priceless.”
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